Capability Coordination with Option-Contract Based on Leader-Follower Game

Logistics Service Supply Chain (LSSC) is different from finished goods inventory supply chain, in which supplier-buyer coordination is approached only through logistics capability adjustment and optimization. A kind of coordination mechanism by options contract on logistics capability based on leader-follower game is developed to increase the parties´ expected profit in this paper. Results show that the negative linear relationship exists between option price and option execute price, and the value of option price must be located in a certain scope as the core element of contract parameters under channel coordination. The effectiveness of coordination mechanism and the proposed mechanism for the allocation of surplus system expected profit is verified through a numerical study finally.